Government Keeps Simpler Green CRC Tax

The UK government has simplified the controversial CRC energy efficiency scheme, but rejected calls to scrap it and replace it with a green tax.

The CRC scheme, set up by the Labour government, was effectively turned into a green tax by the coalition in October, by removing a provision that paid out money to companies who cut their energy use.  Since then, the Department for Energy and Climate Change (DECC) has been consulting on the long term future of the complicated scheme, and has faced calls to scrap the scheme and replace it with a simple tax.

CRC will not be replaced with a tax

“Some have suggested that we should replace the CRC with a conventional tax,” said minister of state Greg Barker (pictured) in a  statement last week. “After considering this, and other policy alternatives suggested by stakeholders, we have decided to retain the CRC, in a simplified form.”

The simplifications are intended to reduce the overhead involved in reporting energy use, and to remove some overlaps with other schemes. In particular companies with CCAs – Climate Change Agreements – will no longer have to take part in CRC.

The scheme originally proposed paying money out to the companies that came top of a league table of energy reductions, that would shame and reward companies for failing or succeeding in changing their energy use.

Last year, DECC announced it would keep all the money paid in – in order to balance its books. However, rather than scrap the reporting required for the old scheme, it is being kept.

As Barker put it: “We believe that the tailored combination of reputational, financial and standardised energy measurement and monitoring drivers remain the most effective way to tackle the barriers to the uptake of energy efficiency. We have ample evidence that price alone does not ensure non-energy intensive organisations implement cost-effective energy efficiency measures that are available to them.”

Providing greater certainty?

Barker promised that the proposals “will provide greater business certainty” because the price of carbon in the scheme will be kept constant in the second year, instead of being set by auctions of allowances.

However, there are still uncertainties – the new proposals have been put out for consultation, and new rules may not be in place for the next financial year. The government is also considering moving the whole scheme from DECC to the Department for Environment, Food and Rural Affairs, which administers the EU’s Emissions Trading Scheme (ETS) in the UK.

Some commentators criticised the proposals for leaving doubts about the future of CRC: “Given that the requirements for emissions reporting under the [CRC] scheme run in line with the financial year, DECC will be hard pushed to finalise its new streamlined processes before the next year gets underway in April,” said James Murray on Business Green.

“After a year of uncertainty for the CRC, during which coalition ministers have scrapped the revenue recycling element and repeatedly signalled that they want to reform the way it operates, businesses and public sector bodies are now staring down the barrel of at least another 12 months of uncertainty,” he added.

But the proposals have been welcomed by others: “Mandatory legislation is vital for a low carbon economy,” said Ali Moinuddin of Interxion, co-chair of The Green Grid’s European communications committee. “We have been supporters of the CRC scheme since it was first put forward and we welcome the news that reporting is being simplified.

“We believe that all businesses should in some way report on energy efficiency if they are an industrial user of power. We also welcome the news that DECC is considering moving the future administration of the scheme to the Environment Agency to exploit the synergies with the EU Emissions Trading System and the CRC Energy Efficiency Scheme, so there’s effectively a ‘one stop shop’ for energy efficiency regulation,” said Moinuddin.